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Can a direct contractor who is back-charging a subcontractor for defective work withhold up to 150% from any pay application submitted by that subcontractor? Or is the good faith withholding exception limited to disputes related to that specific pay application?

Good news: In a case decided on May 15, 2018, United Riggers & Erectors, Inc. v. Coast Iron & Steel Co., the California Supreme Court found it is clear that the good faith disputes that justify withholding are those that relate to the work directly relevant to the specific payment due. The Court determined that allowing a direct contractor to withhold 150% of a disputed amount for any dispute could create a windfall for the direct contractor.

For more details on this, read the full article written by Kevin Cauley of Schwartz Semerdjian Cauley & Moot HERE.

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